City face seems to be Kat's subconscious, saying what she thinks, and also having facial adaptions to show what Kat is actually feeling. This is also how its not affected by the time freeze, as it is part of Kat.
I guess that Kat herself can't see it. And the other 2 are more concerned with annie?
As for it being a time freeze.. No idea, its possibly a mind bubble kind of thing, or something.